The seventh annual Institutional Excellence Awards encompassed one of the most challenging periods for investment in living memory.
Standout asset owners during this period have had to be nimble and responsive as conditions sharply deteriorated in late February and March, only to offer investment opportunities in fits and starts from April even as the global economic environment continued to struggle and a US presidential election reached its crescendo.
When choosing the winners of these awards, AsianInvestor and our select panel of expert industry judges took into account the ability of the region's institutional investors to adapt themselves to these unique challenges, in addition to their ability to maintain superior levels of strategic investment planning, maintaining and improving internal resources and personnel and preparing for the obstacles of the future. The winners were the institutions that could best demonstrate how they met these needs.
Continuing our institutional category awards, we reveal why Ping An Insurance of China stood out as the region's leading life insurer, explain why New Zealand Super Fund reins as the top sovereign wealth fund in addition to its top ranking for Australia/New Zealand, and we discuss the impressive investment into a regional presence being undertaken by Ontario Teachers Pension Plan, as our leading Institutional Investor into Asia .
Ping An Insurance (Group) Company (China)
The desire of China to lead in artificial intelligence and big data is being expressed in several companies. In the insurance and financial sphere, it’s embodied by Ping An.
The insurance group, which has a Rmb3.44 trillion ($520 billion) investment portfolio, has embarked on a series of tech endeavours to ensure it offers cutting edge knowledge of risk management, customer engagement and, increasingly, quantitative data analysis.
One part of this has been an effort to build a centralised investment process that gathers investment approvals and clearing together and processed, depending on the need of specific portfolios. On the investing side, Ping An’s Global Voyager Fund, a venture capital-focused investment vehicle, has invested in next generation technologies like AI and machine learning.
Ping An has also sought to apply AI tools to analyse the ESG credentials
of investee companies, which includes considering the likelihood of them ‘greenwashing,’ or presenting themselves as being more dedicated to sustainability and avoiding dirty emissions than they truly are. And the investor has been putting money where its mouth is in ESG; as of June 30, its responsible investments amounted to Rmb1.18 trillion.
Ping An has generally spread its portfolio relatively well. As with all insurers, it has a sizeable focus on fixed income, having invested 70.6% invested in debt instruments, while it reported another 13.3% in equities, according to its 2020 interim report. The insurer reported an annualised total investment yield of 4.4%.
The insurer particularly focused on real estate assets in logistics, data centres, healthcare and offices in 2020. Chief investment officer Timothy Chan recently told AsianInvestor that the pandemic had given it a chance to gain access to high quality assets at relatively lower valuations. It is also keeping an eye on China’s pilot real estate investment trust programme and aims to invest Rmb10 billion into private equity in 2021.
Plus, Chan believes China equities in general should do well given the relative robustness of its economy. Expect to see Ping An applying its tech talents to make more investments here next year.
SOVEREIGN WEALTH FUND
New Zealand Super Fund
The ability of NZ Super to consistently re-imagine its own operations is an impressive quality, and something that helps it avoid complacency.
One example is in environmental, social and governance (ESG), an area in which it has been an acknowledged global leader – particularly when it comes to considering its exposure to carbon emissions. Indeed, NZ Super set itself targets to reduce the emissions intensity of its portfolio by 20% and its ownership of fossil fuel reserves by 40% by 2020 – and achieved these goals a year early. So, it opted to become more aggressive still, and now aims to cut its portfolio’s emissions intensity 40% and fossil fuel reserves by 80% by 2025.
It also continually self-analyses. In 2019 the Guardians of New Zealand Superannuation employed Kerridge & Partners to conduct a review of the board, which involved interviews with all members over a range of topics. There are no easy quasi-retirement seats on the board of NZ Super.
Added to that, NZ Super has sought to better raise its risk management processes and has begun introducing what it calls a ‘control effectiveness assessment framework’.
The framework essentially seeks to identify evidence that NZ Super’s key controls are operating effectively, and that they – sometimes in conjunction with other measures – can effectively manage the outcomes of top risks that face the fund. The fund has tested the framework over 2019 and 2020 by applying it to two particular risks: hypothetical fraud and cyber security situations. It next intends to apply it to other risks it has identified in the next two to three years.
More prosaically, NZ Super has focused on improving internal efficiencies. In January 2020 it automated new trade transactions through Microsoft Power Apps and a PowerAutomate system. The changes save an estimated 700 manpower hours per year and reduces the risk of human error.
Other improvements include the rollout of Zoom video conferencing during the lockdown period of the Covid-19 pandemic, the introduction of online expenses and approvals, and the deployment of a new CRM suite in April to better manage and track how NZ Super staff were communicating with external stakeholders.
INSTITUTIONAL INVESTOR INTO ASIA
Ontario Teachers Pension Plan (Canada)
Canada’s public retirement schemes are admired the world over as some of the most accomplished investors, but one is frequently cited as a standout player even among its acclaimed peers: Ontario Teachers’ Pension Plan.
In 2020 the C$204.7 billion ($159.6 billion) fund showed why it is held in such high regard with a series of moves that have deepened its presence in and commitment to Asia – and helped it secure this award.
For one thing, OTPP is accelerating its expansion despite the still-uncertain environment created by Covid-19.
The fund opened an office in Singapore in September, its second in the region after Hong Kong, and started building an infrastructure team in the new branch, to be led by Bruce Crane, who was lured from Canadian rival Ontario Municipal Employees’ Retirement System.
Having added to its venture, high-conviction equities and private capital direct investing teams, OTPP now has around 30 staff in the region and aims to add at least 15 more next year.
The plan has also further strengthened its Asian partnership network, most notably through a landmark deal it struck in early November that was very much in keeping with its truly long-term approach.
In November OTPP invested – jointly with Abu Dhabi Investment Authority – $1.25 billion of equity share capital into renewables-focused infrastructure manager Equis Development. The transaction created a corporate vehicle whereby the two funds will invest as equal partners alongside Equis, giving them local capabilities and scale at a stroke.
It was a bold move that could well act as a template for similar tie-ups, said industry observers.
“This is not them buying into an equities fund for the next seven years. This is buying into an equities funding vehicle for longer-term projects, for 20 or 25 years,” said the global head of sales at one US asset manager.
And it is very much in keeping with OTPP’s thinking, he added. “Ontario Teachers’ are on another planet – they are an incredibly visionary investor.”
The Institutional Excellence Award descriptions originally featured in the Winter 2020 edition of AsianInvestor.